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Dear,
My question is related to cost/fee of agent of sales.
If we have agent agreement, in which it is stated that from each sales he has right to sales fee depending on volume of revenue…what do you think.. where this costs of fee should go?
1. In direct costs of the project or?
Becase without this costs and agent provision, the project cant run, becuase agent have exclusivity to sell the end customer products/services.. and if that kind of contract is signed, I think that fee in this case should go in cost of product as direct cost.It depends what you are trying to do.
For the valuation of inventory it is not a production cost and is not included – it is a selling cost.
For calculation of the contribution, then it is relevant.
Thanks for answering, so can we suppose it is a ingineering company develping software service or any service company for example auditing.
So, the process is.. each client has their own cost center, and every hour spend on that customer for the service agreed, is booked to that cost center. At the end of the month you have:
Sales to that customer for example. 100
Cost of sales(manufacturing service) 70
Gross Margin is 30In this 70( cost of sales) are salaries, amortization of equipment, office space used, utilities, trainings.. so all costs direct and indirect which are related to costs of manufacturing the service.
From GM we need to deduct ADM costs, financial costs and other costs.
So, if we cant have exact customer and revenue from that customer without paying a fee to their agent, can we that agent fee treat as “costs of sales/manufacturing” or this is a finacial/marketing cost?
I have just realised that you have asked this in the Paper F2 forum. For management accounting there are no rules – in practice you do whatever is more sensible/useful for helping to manage the particular business.
It is only in preparing financial accounts (Paper F3) that there are rules.
If it is a service business then it doesn’t matter how you categorise the costs.
It is only when it is a manufacturing business and therefore there is a need to value inventory that it matters, and in that case the value of inventory can only include the actual costs of production – the agents fee is not a cost of production.Regardless, what you are asking is not relevant for either the F2 or the F3 exams 🙂
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